Gold's rally this year has been driven mainly by what may be termed Western factors, namely buying on the back of worries over the state of the global economy and the subsequent desire for safe haven assets.
Spot gold has jumped 6.3 per cent to around $1,127 an ounce since the start of year, bringing out bullish views that the yellow metal's dark years since the peak near $2,000 in September 2011 are finally over.
Falling equity markets, both in developed and developing markets, credit and currency worries in China and monetary easing from major central banks other than the U.S. Federal Reserve have made gold look more attractive.
But for any rally to be sustained, much will depend on the reaction of consumers in the two Asian giants, India and China, the world's biggest gold buyers that together account for almost half of physical demand.
There are contradictory forces at work for gold demand in both those countries, notwithstanding the generally positive medium- to long-term outlook for the precious metal for both.
In China, consumer demand for gold could be boosted by worries over yuan depreciation, as buying gold is one of the few ways the middle class can hedge against a weaker local currency.
Speculation that the government may implement controls to limit offshore investment may also spur gold demand in China, again as a de facto way of investing in a dollar-denominated asset that you can buy and sell locally.
The precious metal's gains so far this will are also positive as Chinese investors like to back trades that are already winning.
These supporting factors showed up in the surge of gold imports to China via Hong Kong, which jumped to the highest in more than two years in December.
Net imports by China from Hong Kong, the main way gold enters the mainland, jumped to 129.266 tonnes last month from 79.003 tonnes in November, according to data emailed on Jan. 26 to Reuters by the Hong Kong Census and Statistics Department.
The premium of gold contracts on the Shanghai Futures Exchange over spot prices has also been rising recently.
The front-month contract ended at the equivalent of $1,140.70 an ounce on Tuesday, about $12 an ounce higher than the spot price.
This is quite a turnaround from earlier this year, when spot gold was at a premium to SHFE contracts. On January 7, the spot price was $28.46 an ounce higher than the Shanghai futures.
On the negative side for China is the impact of the slowing economy on consumer confidence.
People worried about losing their jobs are unlikely to spend money buying gold, especially in the key jewellery sector.
The Lunar New Year holidays next week are also likely to slow gold demand, although this may be a temporary factor.
For China, much will depend on the authorities success in managing the fallout as the economy slows while transitioning to be more consumer-driven from the current investment and export-led model.
If the populace can be made to feel more secure in their employment outlook, gold demand should increase steadily, but any signs of a hard landing and rising unemployment will no doubt curb buying.
India government wildcard
In India, there are signs that the government is once again concerned about the level of gold imports, introducing a rule forcing high-value jewellery buyers to disclose their personal tax number.
India made it mandatory for customers to disclose their tax code, or Permanent Account Number, for purchases above Rs200,000 ($2,948.44) from Jan. 1.
The aim of the measure was to try to track down people hiding their wealth, but also to make it harder to buy gold.
However, like other measures India has taken to try curb demand, there will likely be unintended consequences, such as multiple invoicing at amounts below the threshold or even increased smuggling and black market trading.
Similar to China, India's gold demand should benefit from rupee weakness against the dollar, boosting the appeal of the precious metal as a store of value.
Will India's gold imports grow strongly in 2016, matching the 10 per cent growth achieved in 2015?
There's little doubt the demand is likely to be there, whether the authorities are happy with gold imports rising above 1,000 tonnes in 2016, after they reached 904.5 tonnes last year, is another matter.
Currently India can probably afford rising gold imports given the low price of its other big-ticket import, crude oil.
But any increase in the oil price will put pressure on India's current account and may spark increased measures to try and limit gold imports.
Overall, the picture that emerges from the world's top two consumers is that the risks for 2016 are toward higher gold demand, but be wary of poor economic outcomes in China and the chance of more stringent policies in India.
This means Asian physical demand may well be pulling in the same direction as Western investment demand in 2016, adding to the case that gold prices are biased higher.
(The opinions expressed here are those of the author, a columnist for Reuters.)